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Lord Bassam of Brighton: I thank the noble Lord for giving way. In opening, he referred to four amendments in the group. Amendments Nos. 335TA and 340AA cover a subject other than pensions; they cover the Riot (Damages) Act. My understanding is that those issues have been separated, so perhaps for the convenience of the Committee the noble Lord might first concentrate on the issue of pensions. When we have got that out of the way we can move on to the other.

Lord Bradshaw: I shall finish the subject of pensions and then turn to the Riot (Damages) Act.

Current expenditure has risen from 7 per cent in 1991-92 to 13.3 per cent overall in 2000-01. More than £1 billion of police budgets are now spent on pensions. That will increase and in some authorities it is as much as 25 per cent of their costs. It varies from place to place.

The Minister may be assured that we are doing all we can to keep a cap on early and ill-health retirements, but the ongoing costs of pensions are unavoidable. The Government makes a grant but it must cover many items besides pensions. This year, many authorities are having to dig into their own reserves or to increase the council tax by large amounts in order to meet their deficit on pension funds.

In 1998, the Government consulted stakeholders on this exercise and a great deal of time and effort was put into it. The amendment we propose is simple. It proposes that at some point in the future we say that the existing pension scheme will stop and a new

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pension scheme which is properly funded will start. It is quite simple. In time, it will ensure that pensions do not impact on front-line policing.

The amendment would bring a great deal of transparency to the issue of police funding and the cost of pensions. It would enable Parliament, police authorities, chief officers and members of the public to know much more clearly how their money is being spent. I shall stop there because that is the end of what I want to say about pensions. I beg to move.

Lord Bassam of Brighton: It is one of the ironies of life that I was one of the officials on the other side, in local government, who prepared a briefing about this problem more than a dozen years ago. The issue has certainly not gone away.

I do not know whether it is the intention of the noble Lord, but the effect of Amendment No. 335T would be to replace the current statutory scheme with an approved funded scheme similar—perhaps almost exactly the same—to those in the private sector. A public sector scheme such as the police pension scheme can have its benefits guaranteed by statute, but the existence of a fund does not necessarily make an expensive scheme affordable. We need to think long and hard about that. While we understand the concern of police authorities over the increasing burden of funding pensions, we have to consider the solution to this problem very carefully.

I see that the noble Baroness, Lady Harris, is in her place. She and I have debated this issue in the past. It is a problem to which we shall have to give very careful consideration.

The cost of setting up a funded scheme as proposed by the noble Lord would be somewhere in the region of £35 billion. This is a massive sum to divert away from other more immediate—some may say "front line"—issues and uses. We are giving careful consideration to the detailed options but, in broad terms, we think that the better way forward is likely to be a twin-track approach, first, by introducing a better system of financing police pensions—I am sure that the noble Lord will welcome that—and, secondly, by introducing a more affordable scheme for future entrants.

We hope to meet the requirements of police authorities and chief officers for a system which gives a greater certainty about pensions obligations on individual forces. We shall be announcing our conclusions in the very near future. We are also soon due to consider options for modernising the police pension scheme to make it more flexible and affordable, both for the officers and for police authorities.

As to Amendment No. 337A, under the present arrangements the police grant is indivisible. It is calculated from various elements, most of which are related to policing activity with only a relatively small part set aside for pensions. The total grant for each police authority is unhypothecated. We do not attempt to ensure that authorities "break even" on each component. There are swings and roundabouts in this issue to give an overall general fairness.

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If we were to split off a piece of the grant for pensions, it would be logical to break the whole provision into its several components. No doubt at that stage someone would accuse us of control freakery at the centre, but that is a debate for another day. We argue—I think we are right—that this would benefit no one and would limit the scope for police authorities and chief officers to be flexible in the disposition of their carefully managed resources.

As I mentioned in my observations on Amendment No. 335T, we hope to bring forward proposals shortly that will provide greater certainty to police pension costs. We feel that these will meet the main concerns expressed in the noble Lord's amendment. Undoubtedly there will be detailed and careful discussions with the APA and the chief officers on this issue. With those assurances, I hope that the noble Lord will feel able to withdraw his amendment.

9.45 p.m.

Lord Bradshaw: I thank the Minister for that reply. At this time of night, I do not want to protract the discussions.

The scheme that we propose would draw a line under the present scheme, which would stop on a certain date. A new funded scheme would come into effect from that date. So the new funded scheme, which the Minister has said might cost £35 billion, would in fact be invented at a date in the future and would be funded for officers joining after that date. The problem would at least be capped at some time in the future.

I believe that this is the only way out of the difficulty. The alternative is to spend £35 billion, which I cannot see any government doing. Although the police grant is indivisible, we have to meet the police pension. Police authorities regard that as their first obligation. As I have said, some authorities—I believe Merseyside is one—are now spending 25 per cent of their money on this issue.

Lord Bassam of Brighton: I think I follow the noble Lord's drift. But would not the proposal lead to two separate pension schemes being offered? Where would the equity in those two schemes exist? How would the second, the funded scheme, have sufficient funds to pay out pensions from day one? That is what the noble Lord's scheme would envisage. Those are exactly the kinds of questions that worry me. This is exactly why we are concerned about the costs.

Lord Bradshaw: The scheme would not pay out pensions from day one, because the second scheme would apply only to new entrants, who would build up their pensions for a good while in the future. It is only by drawing a line between the two schemes that we can go forward.

I am not an actuary. I do not know how pension funds work; but I do know that they are an incredible burden. Every authority is having to go to its ratepayers for considerably more money to pay for

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pensions than it otherwise would. I intend to return to the matter. In the mean time, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Bradshaw moved Amendment No. 335TA:

After Clause 75, insert the following new clause—

"RIOT DAMAGES
The Riot (Damages) Act 1886 (c. 38) shall be repealed."

The noble Lord said: The amendment seeks to repeal the Riot (Damages) Act 1886. The Act provides that, where a police authority declares under the terms of the Public Order Act that a riot has taken place, we become liable to pay for any damages to buildings and their contents arising from the riot.

The legislation is widely viewed as archaic. The subject was discussed during a debate in this House in 1986 on the Public Order Bill. It has come back into the public eye following the claim against the Bedfordshire police authority for £40 million arising from the fire at the Yarl's Wood detention centre.

The provisions of the Act apply even when there has been no negligence or default on the part of the police. In fact, the mobile support unit from Thames Valley went to Yarl's Wood, and the following day I was present when the chief constable commended officers for their actions. They certainly had no part in any of the damage, only in containing it. The claim was made on the basis that the riots were somehow the result of a failure to provide adequate policing, although I do not believe that that was the case at Yarl's Wood.

I do not believe that there is any justification for these claims being met on the basis of being local disturbances. Claims may fall to be met by insurance companies, but I do not believe that they should fall on the local police authority. Ruth Henig, the chairman of the Association of Police Authorities, has written to John Denham calling on the Government urgently to review the Act. Although she wrote in November last year, no reply has been received from the Minister—which is extremely disappointing, and perhaps underlines the fact that we have very little confidence that the Home Office will meet the deadlines which it sets itself in the Bill. I beg to move.

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